The Federal Energy Regulatory Commission (FERC) should clarify or revise aspects of draft gas policy statements issued in March by FERC that could interfere with FERC’s pursuit of policies that help ensure a reliable and affordable supply of natural gas in order to support a reliable and resilient power grid and reasonable electric rates for consumers, the American Public Power Association (APPA) said.
FERC on March 24, 2022, voted to seek additional comments on two policy statements it issued in February that provide guidance regarding the certification of interstate natural gas pipelines and consideration of greenhouse gas emissions (GHG) in natural gas project reviews.
“Public power utilities across the country continue to reduce their GHG emissions through a variety of means, such as fuel switching to lower-emitting resources, investments in renewable and other non-emitting resources, the integration of distributed energy resources, and a host of energy efficiency measures,” APPA said in comments submitted to FERC on April 25 (Docket Nos. PL18-1, PL21-3).
Public power utilities “also have been reducing GHG emissions by facilitating the electrification of the transportation sector in their communities, and by promoting the electrification of water and space heating, as well as appliances. As new technologies become commercially available and additional investments are made in clean energy technologies, public power utilities will further reduce their GHG emissions,” APPA said.
Meanwhile, natural gas-fired generation continues to play -- and is expected to continue to play -- an important role in the nation’s resource mix. In its most recent Annual Energy Outlook, the Energy Information Administration projects that natural gas resources will remain relatively constant as approximately one-third of the generation mix at least through 2050. “These resources, moreover, are expected to be critical to the overall reliability of the bulk electric system as the resource mix transitions to more intermittent renewable energy, a point that has been emphasized by the North American Electric Reliability Corporation,” APPA noted.
Public Power Utilities Rely On Gas-Fired Generation
Many public power utilities rely on natural gas-fired generation, either owned or contracted through bilateral or organized wholesale markets, and these utilities continue to have a critical interest in access to reliable and affordable supplies of natural gas.
“Even leaving aside the importance of natural gas to electric reliability, the price of natural gas often directly impacts the wholesale price of electricity, both within and outside the organized wholesale markets, and higher natural gas prices are likely to mean higher electricity bills for public power customers,” the trade group noted.
It said that a reliable and affordable supply of natural gas depends on adequate transportation infrastructure. APPA supports Commission policies that streamline the permitting process for needed interstate natural gas pipeline infrastructure, consistent with the Congress’ principal aim in enacting the Natural Gas Act to “encourage the orderly development of plentiful supplies of . . . natural gas at reasonable prices” and “protect consumers against exploitation at the hands of natural gas companies.”
“It is axiomatic that regulatory predictability and certainty help promote investment in necessary infrastructure; indeed, that is one of the stated purposes of the Commission’s revisitation of its gas pipeline certificate policies. APPA is concerned, therefore, by the degree of uncertainty and opposition that the Draft Gas Policy Statements have engendered among natural gas companies and other key stakeholders,” APPA said.
APPA agrees that it may be appropriate to reassess the Commission’s existing policies for evaluating the need for new pipeline infrastructure, particularly with respect to cases involving precedent agreements with pipeline affiliates, to ensure that costs are not being unfairly shifted to captive customers for unnecessary expansions.
But the Commission’s “proposed shift in focus from the economics of proposed pipelines to a more open-ended public interest balancing, however, could create significant uncertainty for the gas industry in trying to gauge the standards for pipeline approval. Such uncertainty could, in turn, constrain natural gas supply availability, potentially increasing electric prices and degrading grid reliability.”
APPA also said that uncertainty regarding how the Commission’s certificate policy will be applied may also perversely undermine decarbonization efforts by influencing electric utilities to retain older, less efficient generating units that might otherwise be displaced due to concerns about inadequate natural gas infrastructure, “notwithstanding the suggestion that the Commission will consider evidence that a proposed project ‘will displace more pollution-heavy generation sources’ in assessing project benefits.”
In this respect, a policy under which the Commission broadly examines the entirety of a proposal and balances all its benefits against all of its adverse impacts “is likely to leave a great deal of uncertainty in the minds of pipeline developers and their potential electric generation customers.”
APPA also urged the Commission to further consider and clarify the suggestion that the Commission will encourage applicants to mitigate indirect GHG emissions “given the substantial uncertainty that the proposed policy has created for natural gas pipeline companies, and the potential deleterious effects that such uncertainty could have on developing needed pipeline infrastructure.”